When you consider a gift to your community through your Community Foundation of
White County, you also want to consider the best form for that gift.
If you have a choice, it’s usually better to give appreciated stock to the Community
Foundation than to give cash. Here’s why: You receive an income tax charitable deduction for
the appreciated value, not just what you paid for the stock in the first place. You also avoid tax on the growth.
Consider Ms. Donor. She is an active member of the community and always seeking
ways to answer needs and opportunities that arise. Knowing that the community foundation
awards grants to support a variety of programs and initiatives in the county, she has decided to give $5000 to the foundation’s community grants (unrestricted) fund, from which such grants are funded.
If she wrote a check for this amount, it would cost her $5000.
Let’s assume, however, that Ms. Donor has stock worth $100 per share that she bought
years ago for only $10 per share. Excellent growth, and not unusual for a good growth stock.
If Ms. Donor gave 50 shares of this stock to the Community Foundation, the gift value
would be $5000, not the $500 she paid for these shares originally. In other words, her $5000 gift would cost her only $500!
Also, consider the capital gains tax Ms. Donor might have to pay if she sold those 50
shares outright. Ouch! She avoids all of that by simply transferring those shares directly to the Community Foundation. Since the Community Foundation is a qualified charity, the IRS
permits us to convert those appreciated shares to cash without paying tax. The Foundation does not pay the ‘growth tax,’ and neither does Ms. Donor.
Now do you see why we encourage our donors to “gift the growth”?
There are, of course, a few rules. First you must have owned the stock for at least one
year plus one day prior to making the gift, and the stock must be transferred directly to CFWC (not passing through the donor’s hands). Second, the value of the gift is determined by the average trading price on the day the gift is made. Third, the charitable income tax deduction may be applied, depending on the donor’s tax situation.
You might think that “gifting the growth” is a good idea but that the process may seem
difficult: “I’ve never done anything like that before.” Actually, it’s much easier than most
people think. In fact, gifting stock is a common practice for many philanthropists – at whatever level.
Your accountant can explain these and other things that may apply to your situation. It’s
always prudent to obtain professional advice when making a non-cash gift, and the Foundation is always willing to work with your advisor to maximize your benefits.
For more information, contact Community Foundation Director Leslie Goss, (574) 583-6911.